Trump investigation & what it means for fiscal policy – Goldman Sachs

Analysts at Goldman Sachs offered some insights over the weekend on the recent uncertainty surrounding the US politics and what it implies for fiscal policy.

Key Quotes:

“Recent developments regarding the investigation into the Trump campaign have further weighed on a fiscal policy process that was already bogged down by House passage of the AHCA, which will consume valuable time in the Senate, an uncertain outcome on the FY18 budget resolution, without which tax legislation would become much less likely, and a lack of clear forward movement on tax reform”

“We are lowering our expectations for fiscal policy changes over the next year”

“Rather than the $1.75 trillion/10 years tax cut we had previously assumed, we now assume a cut of $1 trillion”

“This reflects an expectation of a tax cut that could be considered close to revenue-neutral under the loose definition that congressional Republicans have been using”

“Market expectations appear to have declined even more, and do not imply much if any expectation of tax reform, infrastructure spending, or financial regulatory easing”

“The silver lining for fiscal policy from recent events is that the appointment of a special counsel may reduce the risks around the expiration of spending authority on September 30 and the debt limit deadline around the same time”

“With a credible investigation underway, the issue is less likely to enter into fiscal negotiations at that point, as had looked likely”